Wolters Kluwer 2013 Half-Year Report

Transcription

1 Wolters Kluwer 2013 Half-Year Report Alphen aan den Rijn (July 31, 2013) - Wolters Kluwer, a global leader in professional information services, today released its 2013 half-year results. Highlights Full-year 2013 guidance reiterated. First half revenues up 1% in constant currencies and up 1% organically. - Electronic & services subscription revenues (54% of total) up 4% organically. - Total recurring revenues (77% of total) up 2% organically. - Leading, growing positions (45% of total revenues) all achieving organic growth of 5% or higher. - North America and Asia Pacific driving growth; Europe remains challenging. First half ordinary EBITA 334 million; Ordinary EBITA margin 19.2%. - Margin reflects investments in growth, impact of disposals, and timing of restructuring. - Margin expected to improve as the year progresses. First half ordinary diluted EPS Ordinary free cash flow 140 million, up 1% at constant currencies. Net-debt-to-EBITDA of 2.6x, following 100% cash dividend paid in second quarter. 20 million share repurchase program completed as of July 9, Interim Report of the Executive Board Nancy McKinstry, CEO and Chairman of the Executive Board, commented: Our portfolio continues to strengthen as our leading, growing positions and electronic revenues achieved good organic growth in the first half, helping to more than offset continued weakness in Europe and legacy print products. We sustained investment in growth opportunities and continued efforts to drive efficiencies. We reaffirm our guidance for the full year. Key Figures 2013 Half-Year Six months ended June 30 (in millions of euros, unless otherwise stated) * CC OG Business performance benchmark figures Revenue 1,742 1,735 0% +1% +1% Ordinary EBITA % 0% -1% Ordinary EBITA margin (%) 19.2% 19.6% Ordinary net income % -1% Diluted ordinary EPS ( ) % -1% Ordinary free cash flow % +1% Net debt 2,276 2,258 +1% IFRS results 1 Revenue 1,742 1,735 0% Operating profit % Profit for the period % Diluted EPS ( ) % Net cash from operating activities % - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. Benchmark and IFRS figures are for continuing operations unless otherwise noted. Benchmark (ordinary) figures are performance measures used by management. See Note 2 of the Interim Financial Report for a reconcilation from IFRS to benchmark figures. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. 1) International Financial Reporting Standards as adopted by the European Union. 2) Includes discontinued operations. Wolters Kluwer 2013 Half-Year Results Page 1 (39)

2 Full-Year 2013 Outlook We reiterate our full-year guidance. The ordinary EBITA margin is expected to improve in the second half. The table below provides our guidance for the continuing operations for Performance indicators 2013 Guidance Ordinary EBITA margin % Ordinary free cash flow 475 million Return on invested capital 8% Diluted ordinary EPS Low single-digit growth Guidance for ordinary free cash flow and diluted ordinary EPS is in constant currencies (EUR/USD 1.29). Guidance reflects IAS 19R and IFRS 11, the removal of the pension financing credit or charge from ordinary figures, and includes the estimated impact of performance share issuance offset by share repurchases. Guidance is based on constant exchange rates. Wolters Kluwer generates more than half of its ordinary EBITA in North America. As a rule of thumb, based on our 2012 currency profile, a 1 U.S. cent move in the average EUR/USD exchange rate for the year causes an opposite 1.0 euro-cent change in diluted ordinary EPS. In Legal & Regulatory, we expect our North American operations to see good organic growth in revenues, driven by Corporate Legal Services. However, European legal and regulatory markets are expected to remain challenging. As indicated in February, we expect the divisional margin to contract and to be offset by margin improvement in other divisions. In Tax & Accounting, we expect organic growth and margins to be similar to Growth in software should continue across the division, while trends in print and bank products are expected to remain weak. In Health, we anticipate another year of strong growth in Clinical Solutions. Market conditions for print journals and books are expected to remain soft. Margins will reflect investment in new products and global expansion, compensated by the positive effect of the ongoing mix shift towards Clinical Solutions. Financial & Compliance Services faces tough comparables in Originations & Compliance, while Audit is expected to see some revenue attrition over the coming months as it migrates Axentis customers to TeamMate and other software platforms. We expect good growth in Finance, Risk & Compliance (FRC). Market conditions for our European transport business are expected to remain challenging. We expect divisional organic growth and margin to see improvement in the second half. Ordinary net finance results are expected to be approximately 130 million in constant currencies, including the temporary negative carry caused by early refinancing of our bonds due in The full year benchmark effective tax rate on ordinary income before tax is expected to be broadly in line with the benchmark tax rate of 2012 (27.7%). The impact of divestitures made in the year to date is expected to be slightly dilutive to earnings in Anti-dilution Policy with regard to Performance Shares Wolters Kluwer has a policy to offset the dilution of its performance share issuance annually via share repurchases. To accomplish this in 2013, the Company has completed share repurchases of 20 million as of July 9, Wolters Kluwer 2013 Half-Year Results Page 2 (39)

3 Strategy Wolters Kluwer provides legal, tax, accounting, health, and financial compliance professionals the essential information, software, and services they need to make decisions with confidence. Our strategy focuses on accelerating our organic revenue growth and improving returns. Expand our leading, high growth positions. We are focusing the majority of investment on high growth segments in our portfolio where we have achieved market leadership. These positions, such as Clinical Solutions and Finance, Risk & Compliance, provide global expansion opportunities. In addition, we will continue to drive growth in digital solutions and services across the divisions. Deliver solutions and insights. We will continuously invest in our products and services to deliver the tailored solutions and insights our professional customers need in order to make critical decisions and increase their productivity. We are investing in mobile applications, cloud-based services and integrated solutions. Product investment, including capital expenditure, is expected to remain approximately 8-10% of revenues in the coming years. Drive efficiencies. We will continue to find more ways to drive efficiencies in areas such as sourcing, technology, real estate, organizational processes, and distribution channels. As in the past, these operational excellence programs will deliver cost savings to support investments and margin expansion, while mitigating cost inflation. In 2013, restructuring costs are expected to be funded by cost savings. First-Half 2013 Results The interim financial statements have not been audited or reviewed. Financial Review In the first half of 2013, Wolters Kluwer revenues were stable overall at 1,742 million. Excluding the effect of exchange rate movements, revenues rose 1%. On an organic basis, revenues increased 1% in the first half, following 3% organic growth in the second quarter. Revenues from North America rose 2% organically, while revenues generated in Europe declined 2%. Revenues derived from Asia Pacific and the Rest of World rose 8%. Benchmark Figures Ordinary EBITA declined 2% to 334 million and the ordinary EBITA margin declined to 19.2% (HY 2012: 19.6%). At constant currencies, ordinary EBITA was stable. On an organic basis, excluding the effect of currency, acquisitions and divestitures, ordinary EBITA declined 1%, principally as a result of investments in growth opportunities, dilutive disposals, and the timing of restructuring charges. The net acquisitions and divestitures effect was to add 15 million to revenues with no change to ordinary EBITA in the first half. The ordinary EBITA margin of divested operations has been above Group average. Ordinary net finance results, which include a settlement (related to Lehman Brothers) of 3 million, were 61 million (HY 2012: 62 million). Ordinary net finance costs exclude the employee benefits financing component and exclude results on the sale of investments in equity-accounted investees. The tax rate on ordinary income before tax increased to 27.7% (HY 2012: 27.4%) due to an increased proportion of profits from higher tax jurisdictions, mainly the United States. Ordinary net income declined 2% overall and 1% in constant currencies. Diluted ordinary EPS was 0.66 (HY 2012: 0.67), declining 1% in constant currencies. Wolters Kluwer 2013 Half-Year Results Page 3 (39)

4 IFRS Reported Figures Operating profit, which includes amortization of acquired publishing rights, as well as non-recurring or exceptional items, increased 15% to 285 million. Operating profit benefitted from a 50 million net gain on divestment of operations, principally relating to the disposal of Best Case Solutions in May Net finance results were 51 million (HY 2012: 64 million), benefitting from a 12 million gain on the disposal of the minority investment in AccessData in March Net finance results includes employee benefits financing costs of 2 million and a 3 million settlement received in the first half related to Lehman Brothers. The total effective tax rate increased to 29.3% (HY 2012: 24.3%) mainly due to higher taxable income in the U.S. resulting from capital gains on divestments. Profit for the period from continuing operations increased 20% to 166 million, driven principally by the disposal gains. Discontinued operations recorded a loss of 2 million in the first half, compared to 19 million in the comparable period. Profit for the period including discontinued operations, rose 37% to 164 million (HY 2012: 121 million) and diluted EPS increased 38% to 0.55 (HY 2012: 0.40), largely as a result of the gains on divestments and lower losses on discontinued operations. Cash Flow Ordinary cash flow from operations was 282 million (HY 2012: 313 million), a reduction of 8% in constant currencies. Cash conversion (CAR) was 85% compared to 92% a year ago, due to higher working capital outflows of 46 million (HY 2012: 18 million outflow) as a result of the timing of payments. Capital expenditures increased 4% at constant currencies to 70 million (HY 2012: 67 million) and represented 4% of revenues. Ordinary free cash flow was broadly stable at 140 million (HY 2012: 142 million) as the effect of lower cash conversion was compensated for by lower cash spend on restructuring and lower cash taxes compared to first half Acquisition spending in first half 2013 was 170 million (HY 2012: 7 million) including earn-out payments for acquisitions made in prior years. The main acquisitions in first half 2013 were Health Language in the U.S. and Prosoft in Brazil. Receipts from divestments, net of tax paid, were 75 million (HY 2012: 4 million). Divestitures during the first half of 2013 included Best Case Solutions and the minority interest in AccessData. Following the decision announced in February 2013 to abolish the stock dividend, total cash dividend payments more than doubled to 205 million (HY 2012: 90 million). Share repurchases totalled 14 million in the first half. As of July 9, 2013, the share buy-back program of 20 million was completed. Balance Sheet and Net Debt Net debt at June 30, 2013, was 2,276 million compared to 2,086 million at December 31, 2012, reflecting net use of cash during the period as a result of higher acquisition spend. The leverage ratio net-debt-to- EBITDA (12 month rolling basis) was 2.6x as of June 30, 2013, compared to 3.0x at June 30, 2012 and 2.4x at December 31, Our target net-debt-to-ebitda ratio remains 2.5x, and we expect this leverage ratio to reach or be better than our target by year-end In March 2013, Wolters Kluwer issued a new 700 million Eurobond with coupon rate of 2.875%. Part of the funds raised were used to redeem the perpetual cumulative subordinated bonds of 225 million (6.875%) in May. The remaining net proceeds of the bond will be used to refinance part of our 700 million 2014 senior bonds (5.125%) and for general corporate purposes. Wolters Kluwer 2013 Half-Year Results Page 4 (39)

5 Operating and Divisional Review Health, Tax & Accounting, and Legal & Regulatory organic revenue growth rates improved in the second quarter, helping to drive positive 1% organic revenue growth for the Group in the first half. Health and Tax & Accounting increased ordinary EBITA on an organic basis, partially mitigating declines in Financial & Compliance Services and Legal & Regulatory. Divisional Revenues and Ordinary EBITA (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues Legal & Regulatory % -1% -1% Tax & Accounting % 0% +1% Health % +6% +4% Financial & Compliance Services % +5% -3% Total revenues 1,742 1,735 0% +1% +1% Ordinary EBITA Legal & Regulatory % -3% -3% Tax & Accounting % +1% +4% Health % +9% +5% Financial & Compliance Services % -13% -17% Corporate (22) (21) +6% +6% +6% Total ordinary EBITA % 0% -1% - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Tax & Accounting and Legal & Regulatory acquisitions, net of divestments, include the effect of the net transfer of assets in the U.S. from Tax & Accounting to the Legal & Regulatory division in Total recurring revenues (77% of total revenues) increased 3% in constant currencies and 2% organically. Of this, electronic and services subscriptions grew 6% in constant currencies and 4% organically. Print subscriptions, more than half of which relate to Legal & Regulatory in Europe, decreased 6% organically, with the rate of decline abating slightly (HY 2012: 8% decline). Books (7% of Group revenues), reduced 8% on an organic basis. Demand for printed book editions remains weak, both in Europe and North America, and we further pruned the front list. Corporate Legal Services (CLS) transactional revenues increased 8% organically, despite a tough comparable. Financial Services (FS) transactional revenues, which are largely driven by purchase and refinancing mortgage volumes, declined 4% organically compared to the first half of 2012, when they rose 25%. Other cyclical revenues, including training, consulting, advertising and other transactional revenues, declined 8% organically. Online, software and services revenues, which represent 78% of total revenue, increased 4% organically. Revenues by Type (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues Electronic & services subscription % +6% +4% Print subscription % -8% -6% Other non-cyclical % +3% +3% Total recurring revenues 1,338 1,315 +2% +3% +2% Books % -9% -8% CLS transactional % +8% +8% FS transactional % -3% -4% Other cyclical % -4% -8% Total Revenues 1,742 1,735 0% +1% +1% - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 5 (39)

6 Legal & Regulatory Growth in North America, driven by Corporate Legal Services, partly mitigates decline in Europe. Electronic and services subscriptions organic growth sustained at 3%. EBITA margin declines, as expected. (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues % -1% -1% Ordinary EBITA % -3% -3% Ordinary EBITA margin 19.0% 19.4% Operating profit % Net capital expenditure (CAPEX) Ultimo FTEs 7,474 7,578 - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Tax & Accounting and Legal & Regulatory acquisitions, net of divestments, include the effect of the net transfer of assets in the U.S. from Tax & Accounting to the Legal & Regulatory division in Legal & Regulatory revenues declined 1% at constant currencies reflecting the net effect of disposals and the transfer of assets from Tax & Accounting. On an organic basis, revenues declined 1%, improving from the 2% decline experienced throughout Ordinary EBITA declined 3% at constant currencies and the Ordinary EBITA margin contracted, as anticipated, due to the lower revenue, wage inflation and dilutive disposals. Operating profit increased to 160 million, principally due to 50 million capital gain on the divestiture of Best Case Solutions in May Corporate Legal Services (31% of divisional revenues) delivered 6% organic growth. Despite volatile market conditions, CLS transactional revenues were up 8% (HY 2012: 9%), driven by UCC filing and searches. New products, such as CT Lien Solutions mortgage offering, ilienred, continue to drive growth. Tymetrix, a leader in legal spend management software, launched its new user interface and extended its legal analytics and benchmarking product line. Law & Business (13% of divisional revenues) saw strong growth in its digital solutions, particularly RBsource for securities attorneys, but this was offset by print declines, with legal education books affected by the impact of a strong front list in 2012 and lower student enrollments. The Daily Reporting Suite designed for mobile devices has been well received and this year was expanded to include more areas of the law, including most recently Insurance Law Daily, launched in collaboration with Wolters Kluwer Financial & Compliance Services division. Our European Legal & Regulatory operations (56% of divisional revenues) saw first half organic revenue decline of 4%, compared to a 5% decline in first half Online and software solutions are holding up well, but print subscriptions, books, training, and advertising remain weak across the region. Efforts to drive cost efficiencies continue while investments in mobile and productivity solutions for legal professionals support the ongoing transformation of the business. A legal process management tool developed in Italy, ITER, was adapted and introduced in Poland, Spain and France. Wolters Kluwer 2013 Half-Year Results Page 6 (39)

7 Tax & Accounting Tax & Accounting software up 6% organically, growing in all regions including Europe. Investing in mobile applications and cloud-based solutions. Acquisition of Prosoft establishes foothold in Brazil. (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues % 0% +1% Ordinary EBITA % +1% +4% Ordinary EBITA margin 25.1% 24.8% Operating profit % Net capital expenditure (CAPEX) Ultimo FTEs 5,878 5,581 - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Tax & Accounting and Legal & Regulatory acquisitions, net of divestments, include the effect of the net transfer of assets in the U.S. from Tax & Accounting to the Legal & Regulatory division in Tax & Accounting revenues were stable in constant currencies, including the effect of small disposals and a transfer of assets to Legal & Regulatory. Revenues increased 1% on an organic basis. Ordinary EBITA increased 1% at constant currencies. Revenues and margins benefitted from phasing in the first half of Operating profit decreased to 84 million. North America (56% of divisional revenues) achieved 4% organic growth in tax software revenues, which was partially offset by ongoing decline in bank product transaction fees and weakness in publishing revenues. CCH Axcess, our cloud-based solution that provides tax and accounting firms a suite of tax compliance and practice management products which leverage a single, centralized client database on an open architecture platform, has been well-received. Last month, the product won the CPA Practice Advisor s 2013 Technology Innovation Award, and early users have reported 10%-30% productivity gains. Europe (35% of divisional revenues) achieved positive organic growth. The macro economic environment remains challenging, but there are early signs that growth in software revenues is starting to outweigh decline in legacy print formats and cyclical services such as training. Twinfield, which offers SaaS accounting solutions, achieved double-digit organic growth and is investing in geographic expansion. Asia Pacific and Rest of World (9% of divisional revenues) achieved good growth in tax & accounting software products, while publishing products declined. Global Tax Integrator in the corporate segment is performing well. Acclipse, acquired in July 2012, is performing according to plan. In May 2013, we established a foothold in Brazil with the acquisition of Prosoft, one of the largest tax software providers in the country. Wolters Kluwer 2013 Half-Year Results Page 7 (39)

8 Health Revenues up 4% organically, driven by Clinical Solutions. Clinical Solutions maintains double-digit organic growth. Margins rise despite increased investment. (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues % +6% +4% Ordinary EBITA % +9% +5% Ordinary EBITA margin 19.9% 19.5% Operating profit % Net capital expenditure (CAPEX) Ultimo FTEs 2,713 2,475 - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer Health revenues increased 6% in constant currencies, including the contribution from Health Language, acquired in January Revenues increased 4% on an organic basis. Ordinary EBITA increased 9% at constant currencies, and the margin rose to 19.9%, despite lower print revenues and increased investments to capitalize on growth opportunities for Clinical Solutions. Operating profit decreased to 53 million. Clinical Solutions (43% of divisional revenues) maintained double-digit organic growth and continued its efforts to pursue global growth opportunities. UpToDate further increased its penetration of U.S. hospitals and launched its 21st speciality, Dermatology. UpToDate added local language search in nine languages and work has begun to create a Chinese language version. ProVation Medical achieved double-digit growth with its order sets and clinical documentation software. The clinical drug information group saw positive organic growth supported by Medi-Span in the U.S., Europe and Middle East, and by Medicom in China. Health Language, acquired January 2013, is on track to see double-digit revenue growth in Medical Research revenues (41% of divisional revenues) were broadly stable, as sustained organic revenue growth at Ovid and LWW s online journals was offset by continued weakness in print subscriptions. Advertising declined modestly. Ovid, the world s leading online resource for medical research, expanded its exclusive content offerings with BMJ Clinical Evidence in May. LWW won two new society journal contracts in the year to date Dermatologic Surgery and the Journal of Acute Care Physical Therapy and launched its first fully open access journal, Plastic and Reconstructive Surgery Global Open. Medknow, our open access journal publisher based in India, has expanded its list of open access titles to 275. Half of LWW journals and nearly 80 percent of MedKnow s open access journals increased their Impact Factor in the most recent Journal Citation Reports. Professional & Education (16% of divisional revenues) saw organic revenue decline in the first half due to continued weak demand for print books in certain segments, pruning of front list titles and timing of international and wholesaler orders. Nursing and medical education books are performing well. Digital products are approaching 20% of the unit s revenues (excluding digital revenues bundled with print). Wolters Kluwer 2013 Half-Year Results Page 8 (39)

9 Financial & Compliance Services Finance, Risk & Compliance and core Audit products achieved strong organic growth. Demanding comparables and product pruning held back performance. Margins reflect investment in global infrastructure and the timing of restructuring. (in millions of euros, unless otherwise stated) Six months ended June * CC OG Revenues % +5% -3% Ordinary EBITA % -13% -17% Ordinary EBITA margin 14.6% 17.8% Operating profit % Net capital expenditure (CAPEX) 3 4 Ultimo FTEs 2,349 2,114 - % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Financial & Compliance Services revenues increased 5% in constant currencies, including the acquisition of FinArch in mid Revenue decreased 3% on an organic basis, primarily due to lower transaction volumes and upfront implementation services revenue following strong growth in the comparable period last year. Ordinary EBITA margins declined, reflecting revenue decline, investment in product development and global infrastructure, and the timing of restructuring costs. Finance, Risk & Compliance (42% of divisional revenues) achieved accelerated organic revenue growth, driven by new customer licenses for its Enterprise Risk Management solutions. The integration of FRSGlobal and FinArch is progressing and further investment is being made to extend our global capabilities and expand our regulatory risk consulting service. In early 2013, Wolters Kluwer Financial Services was named a global top 5 provider of Enterprise Governance Risk and Compliance Solutions and Operational Risk Solutions by Chartis. Originations & Compliance (35% of divisional revenues), the leading provider of mortgage document solutions for banks in the U.S., experienced a decline in transaction volumes, partly due to a downturn in the U.S. mortgage refinancing market. FS transactional revenue decreased 4% compared to an increase of 25% in first half In addition, upfront implementation revenues were lower than in the comparable period. isentry, a software and workflow solutions provider in the U.K., was acquired during the first half. Audit, Risk & Compliance (10% of divisional revenues) continues to gain market share with its TeamMate internal audit platform, but this growth was offset by revenue attrition associated with the planned migration of Axentis customers to TeamMate and other platforms. Excluding the effect of this migration, TeamMate achieved 5% organic growth in the first half. The Audit unit has stepped up investments in its next generation platform and opened a hosting center in London to support European clients. Transport Services (13% of divisional revenues) continues to face challenging market conditions in Europe. Freight posting volumes and revenues declined while margins were also impacted by the timing of restructuring charges. Corporate Corporate costs increased 6% mainly due to timing of expenses. (in millions of euros, unless otherwise stated) Six months ended June * CC OG Ordinary EBITA (22) (21) +6% +6% +6% Operating profit (23) (21) +7% Net capital expenditure (CAPEX) 0 0 Ultimo FTEs % Change; CC - % Change constant currencies (EUR/USD 1.29); OG % Organic growth. *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 9 (39)

10 Risk Management In the 2012 Annual Report, the Company has described certain risk categories that could have a material adverse effect on its operations and financial position. Those risk categories are deemed to be incorporated and repeated in this report by reference. In the Company s view, the nature and potential impact of these risk categories on the business are not materially different for the second half of The Company s defined benefit plans are affected by the developments in the international markets and may be further affected by future development in these markets. A decline of interest rates since December 31, 2012, may negatively impact the funded status of these plans. However, at this time the Company does not expect to make material additional contributions to its pension plans other than the ones already scheduled. As weak macro economic conditions in Europe, most pronounced in Southern Europe, continue this may have a negative impact on our business in Italy, Spain and France, in particular for more cyclical products. The impact of these conditions depends on the severity of the economic slowdown, the countries affected and government responses. Statement by the Executive Board The Executive Board is responsible for the preparation of the Half-Year Report, which includes the Interim Report of the Executive Board and the condensed consolidated interim financial statements for the six months ended June 30, The condensed consolidated interim financial statements for the six months ended June 30, 2013 are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The responsibility of the Executive Board includes selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. The Interim Report of the Executive Board endeavors to present a fair review of the situation of the business at balance sheet date and of the state of affairs in the half-year under review. Such an overview contains a selection of some of the main developments in the first six months of the financial year and can never be exhaustive. This Interim Report also contains the current expectations of the Executive Board for the second half of the financial year. With respect to these expectations, reference is made to the disclaimer about forward-looking statements at page 39 of this half-year report. As required by provision 5:25d (2)(c) of the Dutch act on financial supervision (Wet op het financieel toezicht) and on the basis of the foregoing, the Executive Board confirms that to its knowledge: The condensed consolidated interim financial statements for the six months ended June 30, 2013, give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and The Interim Report of the Executive Board includes a fair overview of the situation at the balance sheet date, the course of affairs during the first six months of the financial year of the company and the undertakings included in the consolidation taken as a whole, and the expected course of affairs for the second half of 2013 as well as an indication of important events that have occurred during the six months ended June 30, 2013, and their impact on the condensed consolidated interim financial statements, together with a description of the principal risks and uncertainties for the second half of 2013, and also includes the major related parties transactions entered into during the six months ended June 30, Alphen aan den Rijn, July 30, 2013 Executive Board N. McKinstry, CEO and Chairman of the Executive Board K. B. Entricken, CFO and Member of the Executive Board Wolters Kluwer 2013 Half-Year Results Page 10 (39)

11 CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Interim Financial Statements for the six months ended June 30, 2013, and 2012 Unaudited Condensed Consolidated Statement of Income Unaudited Condensed Consolidated Statement of Comprehensive Income Unaudited Condensed Consolidated Statement of Cash Flows Unaudited Condensed Consolidated Statement of Financial Position Unaudited Condensed Consolidated Statement of the Changes in Total Equity Notes to the Unaudited Condensed Consolidated Interim Financial Statements Wolters Kluwer 2013 Half-Year Results Page 11 (39)

12 Unaudited Condensed Consolidated Statement of Income (in millions of euros, unless otherwise stated) Six months ended June * Continuing operations: Revenues 1,742 1,735 Cost of sales Gross profit 1,171 1,155 Sales costs General and administrative costs Total operating expenses Results on divestments of operations 50 0 Operating profit Finance income 15 6 Finance costs (66) (70) Share of profit of equity-accounted investees, net of tax 0 0 Profit before tax Income tax expense (68) (44) Profit for the period from continuing operations Discontinued operations: Profit/(loss) from discontinued operations, net of tax (2) (19) Profit for the period Attributable to: Equity holders of the Company Non-controlling interests 0 (1) Profit for the period Earnings per share (EPS) ( ) Basic EPS from continuing operations Basic EPS from discontinued operations 0.00 (0.06) Basic EPS Diluted EPS from continuing operations Diluted EPS from discontinued operations 0.00 (0.06) Diluted EPS *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 12 (39)

13 Unaudited Condensed Consolidated Statement of Comprehensive Income (in millions of euros) Six months ended June * Comprehensive income: Profit for the period Other comprehensive income: Items that are or may be reclassified subsequently to the statement of income: Net gains/(losses) on hedges of net investments and exchange differences on translation of foreign operations (17) 76 Gains/(losses) on cash flow hedges 14 (12) (3) 64 Items that will not be reclassified to the statement of income: Actuarial gains/(losses) on defined benefit plans 21 (28) Income tax on other comprehensive income (8) 9 13 (19) Other comprehensive income/(loss) for the period, net of tax Total comprehensive income for the period Attributable to: Equity holders of the Company Non-controlling interests (2) (1) Total *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 13 (39)

14 Unaudited Condensed Consolidated Statement of Cash Flows (in millions of euros) Six months ended June * Cash flows from operating activities Profit for the period from continuing operations Adjustments for: Net finance costs Share of profit of equity-accounted investees, net of tax 0 0 Income tax expense Amortization, impairments, and depreciation Additions to acquisition integration provisions 5 4 Fair value changes of deferred acquisition payments (1) - Share-based payments 8 9 Book (profit)/loss on divestments of operations (51) 0 Autonomous movements in working capital (46) (18) Paid financing costs (102) (103) Paid corporate income tax (38) (56) Appropriation of provisions for restructuring (17) (32) Other (1) (6) Net cash from operating activities Cash flows from investing activities Capital expenditure (70) (67) Disposal of discontinued operations, net of cash disposed of - 6 Acquisition spending, net of cash acquired (170) (7) Receipts from divestments of operations, net of tax 75 4 Dividends received 2 2 Net cash used in investing activities (163) (62) Cash flows from financing activities Repayment of loans (377) (34) Proceeds from new loans Repurchased shares (14) (89) Dividends paid (205) (90) Net cash from/(used) in financing activities 101 (213) Net cash from/(used) in continuing operations 137 (84) Net cash used in discontinued operations 0 (12) Net cash from/(used) in continuing and discontinued operations 137 (96) Cash and cash equivalents less bank overdrafts at January Exchange differences on cash and cash equivalents and bank overdrafts (8) Cash and cash equivalents less bank overdrafts at June Add: Bank overdrafts at June 30 (159) (109) Cash and cash equivalents at June * 2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 14 (39)

15 Unaudited Condensed Consolidated Statement of Financial Position (in millions of euros) June 30, 2013 December 31, 2012* June 30, 2012* Non-current assets Goodwill and intangible assets 4,778 4,651 4,756 Property, plant, and equipment Investments in equity-accounted investees and joint ventures Financial assets Deferred tax assets Total non-current assets 5,070 4,977 5,146 Current assets Inventories Trade and other receivables 916 1, Income tax receivable Cash and cash equivalents Assets held for sale Total current assets 1,549 1,579 1,331 Current liabilities Deferred income 1,140 1,233 1,147 Trade and other payables Income tax payable Short-term provisions Borrowings and bank overdrafts Other current liabilities Short-term portion of long-term debt Liabilities held for sale Total current liabilities 2,750 2,655 2,326 Working capital (1,201) (1,076) (995) Capital employed 3,869 3,901 4,151 Non-current liabilities Long-term debt 1,902 1,918 2,156 Deferred tax liabilities Employee benefits Provisions Total non-current liabilities 2,349 2,343 2,597 Equity Issued share capital Share premium reserve Other reserves 1,377 1,415 1,411 Equity attributable to equity holders 1,500 1,538 1,534 Non-controlling interests Total equity 1,520 1,558 1,554 Total financing 3,869 3,901 4,151 *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 15 (39)

16 Unaudited Condensed Consolidated Statement of Changes in Total Equity (in millions of euros) Equity attributable to equity holders of the Company Noncontrolling interests 2013 Total equity Balance at January 1* 1, ,558 Total comprehensive income for the period 176 (2) 174 Share-based payments, net of tax 6-6 Cash dividend (205) - (205) Repurchased shares (15) - (15) Other Balance at June 30 1, ,520 Equity attributable to equity holders of the Company Noncontrolling interests 2012* Total equity Balance at January 1 1, ,563 Total comprehensive income for the period 166 (1) 165 Share-based payments, net of tax 7-7 Cash dividend (90) - (90) Repurchased shares (91) - (91) Balance at June 30 1, ,554 * 2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 16 (39)

17 Notes to the Unaudited Condensed Consolidated Interim Financial Statements Note 1 Reporting entity Wolters Kluwer nv ('the Company') with its subsidiaries (together 'the Group') is a market-leading global information services company. These unaudited condensed consolidated interim financial statements ( interim financial statements ) for six months ended June 30, 2013, comprise the Group and the Group s interests in associates and a joint venture. Note 2 Basis of preparation (a) Statement of compliance These interim financial statements have been prepared in accordance with International Accounting Standards (IAS) 34 Interim Financial Reporting, as adopted by the European Union. They do not include all the information required for a complete set of IFRS financial statemens. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group s financial position and performance since the last annual consolidated financial statements for the year ended December 31, The interim financial statements for six months ended June 30, 2013, has been abridged from the Wolters Kluwer s 2012 Financial Statements. The 2012 comparatives have been restated for the new accounting standards adopted as of January 1, 2013 (see Note 3). These interim financial statements have not been audited or reviewed. The interim financial statements were authorized for issue by the Executive Board and Supervisory Board on July 30, (b) Judgments and estimates The preparation of the interim financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expenses. In preparing these interim financial statements, the significant judgments made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to Wolters Kluwer s 2012 Annual Report. Reference is made to Note 3 Accounting Estimates and Judgments to the Consolidated Financial Statements of Wolters Kluwer. Further reference is made to Note 26 Financial Risk Management. Note 26 outlines Wolters Kluwer s exposure to currency risks, interest rate risks, liquidity risks, and credit risks. Actual results in the future may differ from these estimates and current risk judgments. Estimates and judgments are being continuously evaluated and are based on historic experience and other factors, including expectations of future events believed to be reasonable under the circumstances. (c) Currency The interim financial statements are presented in euro, which is the Company s functional and presentation currency. Unless otherwise stated the financial information in these interim financial statements is in euro and has been rounded to the nearest million. Exchange rates to the euro U.S. dollar (at June 30) U.S. dollar (average six months) U.S. dollar (at December 31) 1.32 Wolters Kluwer 2013 Half-Year Results Page 17 (39)

18 Note 3 Significant accounting policies The accounting policies applied in these interim financial statements are the same as those applied in Wolters Kluwer s 2012 Annual Report, except for a number of new standards that became effective as of January 1, Of these standards, IFRS 11 Joint Arrangements and IAS 19 Employee benefits (amended 2011) have an impact on the results and equity of the Group. (a) Defined benefit plans IAS 19 Revised ( IAS 19R ) Employee benefits (amended 2011) was adopted by the Group on January 1, The 2012 results were restated retrospectively. The main changes are: IAS 19R prohibits the deferred recognition of actuarial gains and losses on employee benefit plans (the socalled corridor method ). The removal of the corridor method has no impact on the Group results as the Group already immediately recognized actuarial gains and losses in other comprehensive income. IAS 19R requires calculation of the net interest costs on the net defined benefit liability or asset using the discount rate measuring the defined benefit obligation. As a consequence, net interest income on plan assets is no longer based on the long-term rate of expected return, but based on corporate bond yields irrespective of actual compisition of plan assets. This results in a reduction of net profit if the discount rate applied to the defined benefit obligations is a lower rate than the rate used to determine the expected return on plan assets. IAS 19R requires past service costs to be recognized in the statement of income in the period of a plan amendment. Under the former standard the portion of past service costs related to unvested benefits was deferred and amortized over the remaining average vesting period. The employee benefits financing component will be presented as part of Finance costs/(income), rather than within operating profit as reported in previous years. IAS 19R no longer allows for accrual of future pension administration costs as part of the defined benefit obligations. These costs are expensed as incurred. Previously, for the Dutch pension plan, the Company included a surcharge for pension administration costs as part of the current service costs into the defined benefit obligations. With the adoption of IAS 19R this provision is eliminated resulting in a lower defined benefit obligation. The Group s benchmark figures will exclude the net employee benefits financing component to better reflect the operating pension expenses related to the Group s pension and post-retirement plans. The impact of the IAS 19R changes as described above results in an increase in the Group s equity by 1 million, and lowering of the net profit for the year by 10 million for the full year For the half-year 2012 the restated net profit is 4 million lower and Group equity showed no impact. (b) Joint arrangements The Group early adopted IFRS 11 Joint Arrangements as part of a suite of five amended consolidation standards (IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011), and IAS 28 Investments in Associates and Joint Ventures (2011)) to align with the IASB effective date of January 1, Of these five standards, only IFRS 11 has an impact on the presentation of the results of the Group. Under the new standard the structure of the joint arrangement is no longer the main factor to determine the type of joint arrangement and therefore the subsequent accounting. Under IFRS 11, the company s interests in joint ventures will be equity-accounted. Adoption of IFRS 11 results in a decrease in the Group s revenues ( 6 million) and operating profit ( 2 million) for the full year There is no full year 2012 impact on equity and net profit. For the half-year 2012 the restated revenue is 4 million and operating profit is 2 million lower. Group equity and net profit were not impacted. The reconciliations between the previously reported IFRS figures under the existing standards and the restated amounts are presented in Appendix 1. Wolters Kluwer 2013 Half-Year Results Page 18 (39)

19 (c) Fair value measurement IFRS 13 established a single framework for measuring fair value and making disclosures about fair value measurements. More specifically, the definition of fair value is clarified to be the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurements guidance prospectively. The change had no impact on the measurement of the Group s assets and liabilities. (d) Presentation of items of other comprehensive income As a result of the amendments to IAS 1, the Group has modified the presentation of items of other comprehensive income in its condensed consolidated statement of comprehensive income, to present separately items that would be reclassified to the statement of income in the future from those that would not be. Comparative information has also been re-presented accordingly. (e) Offsetting disclosures financial assets and liabilities The amendment to IFRS 7 requires disclosing information about rights of offset and related arrangements for financial instruments under an enforceable master netting agreement or similar agreement. The adoption of the amendment to IFRS 7 did not have any impact on our interim financial statements. Note 4 Seasonality Some of the Group s businesses are impacted by seasonal purchasing patterns. Revenues of Wolters Kluwer s tax and regulatory businesses are strongest in the fourth and first quarters, in line with statutory (tax) filing requirements. The cash flow is typically strongest in the fourth quarter as calendar-year subscription renewals are received. Wolters Kluwer 2013 Half-Year Results Page 19 (39)

20 Note 5 Benchmark Figures Wherever used in this half-year report, the term ordinary refers to figures adjusted for non-benchmark items and, where applicable, amortization and impairment of goodwill and publishing rights. Ordinary figures are non-ifrs compliant financial figures, but are internally regarded as key performance indicators to measure the underlying performance of the business from continuing operations. These figures are presented as additional information and do not replace the information in the statement of income and in the statement of cash flows. The term ordinary is not a defined term under IFRS. Reconciliation between operating profit and ordinary EBITA (in millions of euros) Six months ended June * Operating profit Amortization of publishing rights and impairments EBITA Non-benchmark (income)/costs in operating profit (44) 5 Ordinary EBITA *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Reconciliation between finance income, finance costs, and ordinary net finance results (in millions of euros) Six months ended June * Finance income 15 6 Finance costs (66) (70) Net finance results (51) (64) Non-benchmark (income)/costs in net finance results (10) 2 Ordinary net finance results (61) (62) *2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Reconciliation between profit for the period and ordinary net income (in millions of euros) Six months ended June * Profit for the period from continuing operations attributable to equity holders of the Company (A) Amortization of publishing rights and impairments (adjusted for non-controlling interests) Tax on amortization and impairments of publishing rights and goodwill (adjusted for non-controlling interests) (32) (30) Non-benchmark costs, net of tax (29) 5 Ordinary net income (B) * 2012 restated for IAS 19R Employee benefits and early adoption of IFRS 11 Joint arrangements. Wolters Kluwer 2013 Half-Year Results Page 20 (39)